Crisis talk, austerity calls mark euro anniversary

Policymakers marked the 10th anniversary on Sunday of the introduction of euro notes and coins by urging governments in the currency bloc to save and consolidate to overcome their debt crisis.

While German Finance Minister Wolfgang Schaeuble called the euro a clear success story and pledged the currency would remain stable, he also urged vulnerable debtor states to follow a tough savings course in 2012, boost their competitiveness and work to win back market confidence.

This is not a euro crisis, it is a debt crisis in some euro states, Schaeuble told German newspaper Bild in an interview to be published in Monday's edition of the paper.

The crisis that began in Greece more than two years ago has since forced Ireland and Portugal to seek bailouts and now threatens the efforts of the bloc's third largest economy, Italy, to raise 450 billion euros ($580 billion) to finance its debt burden this year.

The head of Standard Chartered bank told a British Sunday newspaper that political leaders had yet to offer a meaningful solution to the bloc's debt crisis.

We enter 2012 with a very difficult outlook for the euro zone ... with an increasing possibility of countries actually leaving the euro zone, Peter Sands, chief executive of the Asia-focused bank, told the Sunday Telegraph newspaper in an interview.

German Chancellor Angela Merkel herself warned 2012 would be harder than 2011 and Europe still had a long way to go in overcoming the crisis.

In Italy, President Giorgio Napolitano called for sacrifices. No one today can shirk his or her responsibility to contribute to putting the public accounts on track and averting Italy's financial collapse, Napolitano said in a 20-minute, nationally televised address late on Saturday.

It's hard to regain credibility after having lost so much ground, and our bonds -- despite some encouraging signs in recent days -- remain under attack in the financial markets, the 86-year-old president said.

In France, the European Central Bank's Christian Noyer defended the currency union, saying the euro could yet become the world's leading currency if leaders of the 17-nation bloc succeed in tightening fiscal integration.

European Union leaders agreed at an emergency summit on December 9 to draft a new treaty for deeper economic union, with Britain the only country among the 27 EU nations declining to join the initiative.

If we implement all the decisions taken at the Brussels summit we will emerge stronger, Noyer said in an article for Journal du Dimanche to mark the euro coin anniversary. Notes and coins were introduced in 2002, three years after the currency began trading electronically.

ONE LAST SCHNAPS

In a separate interview, Bundesbank President Jens Weidmann revived an analogy between over-spending governments and alcoholics, saying some politicians reminded him of the drunk who promises to be sober from tomorrow but asks for the Schnaps bottle one last time today.

Weidmann repeated that Berlin, which itself has flouted European budget rules over the last 10 years, should also be saving more, particularly given its economic strength and special responsibility as an anchor for the euro bloc.

In a advance copy of the interview with Berlin's Tagesspiegel newspaper, due to appear on Tuesday, Weidmann praised the German government for cutting its budget deficit in 2011 but added: The government's consolidation pause in the new year is not convincing ... we need to see a balanced budget achieved swiftly.

Germany's Bundestag lower house of parliament last November approved a 2012 budget which sees net new borrowing of 26.1 billion euros, up from net new borrowing of 22 billion in 2011.

The country's Spiegel magazine reported net new borrowing this year could reach 35 billion euros, without citing sources, due to contributions Germany must pay into the permanent euro zone rescue fund. A Finance Ministry spokeswoman declined to comment on the report, but said contributions to the rescue fund would likely be settled at the end of January.

The budget deficit is seen at around 1.3 percent in 2011, down from 4.3 percent in 2010, helped by strong tax revenues. The government sees a deficit of 1 percent in 2012, 0.7 percent in 2013 and a balanced budget by 2014.

While Weidmann has frequently encouraged the government to set a good example to euro zone peers by saving, German consumers are being urged to spend more by euro zone peers to support the regional economy. However, the German economy is forecast to slow sharply in 2012 from the likely 3 percent growth pace of 2011.

Turning to the ECB, Weidmann rejected suggestions he is isolated on the governing council in his strong opposition to the central bank buying up government bonds in the open market to hold down borrowing costs.

While investors and traders say the ECB could stop the crisis by buying up sovereign bonds in much bigger quantities, the Bundesbank has led opposition to even the current smaller scale purchases.

We can only maintain the necessary pressure on politicians when the ECB limits itself to its primary aim of keeping inflation under control and doesn't jump into the breach for fiscal policy... we must set clear boundaries, Weidmann said.

I don't see how we can overcome a crisis of confidence by ignoring the rules.

(Reporting by Alexandra Hudson; Additional reporting by Steve Scherer in Rome and Vicky Buffery in Paris; Editing by Ruth Pitchford)